How to Buy in Ottawa during a Hot Sellers Market
Here are the top 7 tips to buying a home in a hot sellers market.
1) Get a mortgage pre-approval
Get a mortgage pre-approva
l. In this fast moving market. It is critical to have a mortgage pre-approval in hot sellers market. This helps ensure we ready and able to take action on a new listing when the right property pops up. It doesn’t cost you anything. You can reserve an interest rate, and you can shop with confidence once your mortgage approval is in place.
2) Homes are selling fast
“The early bird catches the worm”…or in this case the early buyer wins the home. You and your agent should be ready to act quickly in hot sellers market. This means having an active automatic property search, which will notify you up to 24 hours before new listings are accessible on public websites like REALTOR.ca. Don’t wait for next day showings! It might be sold within hours!
3) Sometimes listing agents withhold offers for a week
Many agents are starting to withhold offers on new listings. This means that they will not consider any offers for a specific period of time, such as week. In a hot sellers market, this allows more buyers to see the home and helps them to generate multiple offers and sell for more money.
4) Don’t expect to negotiate much
In a hot sellers market, if you are lucky enough to be the first to submit an offer on a home, you want to come to an accepted offer as fast as possible. If you try to submit a low price with the hopes of negotiating a good deal. It will take more time to come to an accepted offer. The longer the negotiating process goes on for, the more opportunity there is for other buyers to see the home and submit an offer of their own. It is often better to offer full asking price immediately, than to wait and have a multiple offer situation and you have to offer more than asking price. You are also way more likely to be able to include conditions on your offer if you offer quickly and at full asking price.
5) Often there are multiple offers
Be prepared to have more than one buyer competing for the same home. This changes our negotiating strategy… In a hot sellers market, most times we don’t have the opportunity to offer a lower price and expect to negotiate something lower than asking. In a multiple offer situation, you have ONE chance to have your offer accepted. Each buyer submits their best offer and the seller will accept the best one. This is done like a closed envelope bid…where all the buyers KNOW they are competing for the house, but they DON’T KNOW what each other is offering.
6) Many buyers are skipping the conditions
In an effort for their offer to be more attractive to other competing offers, buyers sometimes will submit an offer without any conditions. For example, no inspection or financing condition. In a hot sellers market, this makes the offer look way more attractive, but it ads extra risk to the buyer
6a) Risk of no Inspection
An inspection is normally performed to help discover any defects with the home. This way you hopefully don’t have any big expensive surprises with the condition of the home. Without an inspection there is a great chance of something going unnoticed until after closing and you may have some repairs/maintenance to perform.
6b) Risk of no Financing condition
Some buyers even skip the financing condition. This would be because they have sufficiently high confidence that they have the cash or mortgage approval, to submit an offer without financing condition. Having a strong mortgage preapproval helps greatly. A preapproval does not guarantee a final mortgage approval however and it leaves you with the risk of not being able to secure financing before closing. One of the biggest risks is in a scenario where you have had to offer a purchase amount much greater than what other similar homes have sold for. If the bank performs an appraisal and they deem that the purchase price is higher than the appraised value of the house, then they will not grant a mortgage for the full amount. You would be responsible to come up with the remaining money from your own source of funds. For example if you purchase a home for $450,000 but the bank appraises the home at $420,000, then you would be responsible to come up with the remaining $30,000 from other sources.
6b) Risk of no Status Certificate (Condominium)
When buying a condo it is valuable to order a copy of the condo status certificate and have it reviewed by your lawyer. The purpose is to ensure that the condominium corporation is being well managed and that the company is financially healthy. Your lawyer will help you understand the financial position of the company, including revenue vs expenses, and future expenditures vs the current reserve fund. If you forego the status certificate condition, you are basically “buying blind” into the condo corporation. Everything may be all well and good, however their is the risk that you are buying into a condo corporation filled with financial risks and operational mismanagement, which could potentially costs you a lot of money in the future. It’s always best to preform the necessary due diligence before you buy into a condo.
7) Perform a pre-inspection
In a hot sellers market, if time permits, such as a scenario where the listing agent is withholding offers, then it might make sense to perform a pre-inspection of the home. This is like any other home inspection, but you get it done BEFORE you submit your offer. YES this means paying a home inspector on a home you don’t know you will win, but having no inspection condition might be exactly what you need to set your offer above other competing offers.